Claims Delegates- The Dark Side of Insurance Programs

Claims Delegates is your resource, advocate, and knowledge center on the front line of the insurance claims process.

Lets talk about program work.

There are a lot of good things about being a part of insurance programs, but I dont want to talk about them.

Insurance programs or preferred provider networks are agreements that insurance carriers make with service providers in exchange for certain considerations. These

considerations are all designed for one purpose: to save the insurance company money.

If you dont believe me, allow me to explain. First, lets look at the arrangement.From a service providers point of view, the program is a lead generation tool. In exchange for the things Im about to explain, they receive a steady stream of jobs (or so it is sold).

That doesnt sound so bad at the outset. But lets play it out.

Seapro Restoration signs up to be a preferred provider for Farthers Insurance. (Names have been changed to protectwhatever). Soon, Farthers is sending Seapro a steady stream of qualified leads.

Things are good and Seapro decides that now is a great time to invest in some new equipment or hire more staff.

Then a storm hits. Farthers gets flooded with claims in the region. In turn, Seapros phones start ringing off the hook. Theyre not only getting calls to handle program work, but also calls from regular customers in their market.

The Program rules dictate that priority must be given to Farthers claims first, so it is. Seapro puts everyone else on a wait list and then proceeds to work all-hands for the next 20 days straight. At the end of the CAT, everyone is tired, but they managed to service most of their key accounts.

Everyone takes a deep breath, and a well deserved vacation. (Yeah right) Everything returns to normal and the program work keeps flowing like clockwork. Then something changes.

A manager somewhere back East decides that Farthers Premier Operator Service isnt generating the anticipated cost savings they planned for. The program ends without notice the next month.

Seapro is in a pickle now. No problem, they say, we werent doing too bad before the P.O.S. was created. We still have market share. But they dont.

While they were kept busy with program work, their competitors were making real connections and marketing efforts in the market. And now the phones at Seapro simply dont ring like they used to.

Business lags, and layoffs ensue. People tighten their belts, and managers start a frantic search for another program to replace the lost Farthers work. And maybe they find one.

All programs are different, but as long as the phone rings its OK right? So Seapro signs up for County Mutuals Cleanup, Respond And Perform program.

This new program comes with some requirements that Seapro wasnt used to. Service providers in the C.R.A.P. program are required to respond to every assigned loss in their prescribed zip codes within one hour. They are also required to upload a completed estimate within the first 24hours, regardless of coverage or work to be performed.

Seapro operates out of a rural county in Montana. Their assigned territory is a hundred miles across. The requirements of the C.R.A.P. program now require a project manager or estimator to respond to every loss, instead of a technician. Pictures must be taken, a scope written and conversations with customers.

Seapros only PM (because lay offs already forced them to drop their secondestimator) finds himself driving over a hundred miles a day just to keep up. Their ratio of sold jobs begins to suffer because they no longer have the option of qualifying actual jobs from dead ends. Their job profitability begins to drop because jobs at the edge of their service area require four hours of labor just to get to and back (two techs at one hour each way).

Then County Mutual starts really putting the screws in. At contract renewal time County Mutual sends out the memo:Beginning next month, all Cleanup, Respond and Perform program vendors will be required to use a new pricelist.

Do you think the pricelist is higher or lower than the standard zip code pricelist?

Now Seapro is working harder than ever for the privilege of reducing their daily equipment rental rates by 10%. And then the next CAT hits. And then the summer slow-down.

I believe youre seeing the pattern by now.

The reality is that insurance program work is increasingly less profitable and more labor intensive for the vendors. Deals are cut and checks are written at the highest levels nationally, which have to be cashed at the local level. And the number of changes and additional requirements added annually is dizzying.

Carriers are saving on claims expenses by making their vendor programs do the jobs formerly reserved for adjusters and inspectors. TPAs are promising huge claims savings and accomplishing them by slashing price lists. Theyre also using arbitrary drying standards to further reduce mitigation invoices like never before.

Every day the line between contractor and adjusting company is blurred further, until one day we dont be able to tell one from the other.

The reality of programs is that they only benefit the carrier, at the expense of the contractor AND insured. No homeowner cares whether you put O&P on a cleaning item (oh the shame), or charged to replace a HEPA filter (whats a HEPA?). The TPA companies do.

How does turning off Base Service Charges affect whether a basement gets dried out properly? It doesnt. Why is the carrier not concerned about the customer experience?

They are. You only need to realize who the real customer is: the insurance company. Thats how they see it. Vendor programs are there to service THEM. Insureds exist only to pay THEM. The entire system is created AND controlled by the same people: insurance companies.

Thats how a great deal of franchise operators see it as well. When youre on a program long enough, you start to operate differently than a customer-centric company. It doesnt take long before your relationship with your carrier and adjusters takes on a more important role than your relationship with your customers.

Ive been told more than once by several people,

We have two customers; the adjuster and the homeowner.

That statement never jived with me. Thats not how I operate.

What happens when there is a dispute? Or when one side asks you to do something that is not in the best interest of the other? Who gets the tie vote? In the program world, the tie always goes to the carrier. There are more umpires than players.

Program vendors (in general) only care about the end-user experience as far as the program review is concerned. A passing score is all thats needed. Theyre playing not to lose.

So who is the real customer? Your own answer to the question will tell you how much program work you do. If you answer honestly, are you OK with it?

There are thousands of quality, honest restoration contractors on both sides. There always will be. My beef is not with any of them. This is a warning.

A warning to those who have yet to experience the ups and downs of the restoration industry that the rest of us know and love. To those who are thinking about starting a disaster recovery company or are a new hire.

Think about where you want your work to come from, and who you want your customer to be.

Disaster recovery is an incredibly dynamic and rewarding industry. We get to come to the rescue every day, and for the most part our true clients are thankful and grateful for our assistance. And until recently, there were systems and programs in place that ensured that if you knew what you were doing, you could make a great living.

The game is changing. The rules are changing. We must be increasingly discerning about which games we choose to play.

Choosing the program game may not be worth the price of admission.

Andrew McCabe is anXactimateestimator and licensed adjuster based in Portland, Oregon.

His companies,Claims DelegatesandContractors Claim Service, were created to help educate and serve both restoration contractors and insureds navigate the increasingly complicate claims landscape.

His upcoming book,The 24-Hour Tech,is designed to help mitigationcontractors increaseprofitability of water damage cleanup, and to reduce the necessary training time for new technicians to one day.

For more information, feel free to contact Andrew at888.745.7568FREEor Andy@ClaimsDelegates.com